Stock market to ride on flamboyant corporate earnings

Enjoying an all time high status the Colombo stock market is likely to have a fresh ride starting this week on the strength of “flamboyant” corporate earnings expected.

Colombo Bourse last week concluded by recording yet another milestone, with the All Share Index breaking through the 7200 mark. The Week commenced with the indexes closing down extending the previous weeks’ profit taking, which recovered towards the latter part of the week.

Asia Securities said active retailers however re-entered pecking on the low to mid caps driving up the daily volumes to an average 175 mn.

“Institutions pumped up the daily turnovers focusing on the fundamentally strong counters.  Hence we believe that the investors will continue to stick on to their fundamentals, being alert on the upcoming quarterlies which are expected be “shocking” for some sectors, and capitalise on this opportunity,” Asia Securities added.



Acuity Stockbrokers said bourse steadily picked up during the first three weeks of 2011 rebounding from the lackluster end to 2010 which saw the ASPI losing 7% from its peak in October 2010. The market has gained momentum to reach a new high closing the week recording a year to date gain of 9.3% already.

“We expect active retail and institutional participation to drive the market with profit taking on certain counters. More corporate earnings are expected to be released during the weeks ahead adding impetus to investor sentiment,” Acuity added.

TKS Securities said that the bourse ended the week on mixed sentiments where investors were seen mostly picking on small cap stocks on speculations.

“We believe the market would run on a positive momentum with the dawn of the earnings season, which would fill the air with ideas,” it added.

Further institutions might stretch their horizons and tap medium-large cap counters which have been bearish during the past couple of months. “Investors might be bullish on Leisure and Banking Sector counters with flamboyant earnings expectations for the December Quarter. However we advice our investors to be cautious on fads and tap counters with strong earning potentials and sustainable ROEs. Further market is hovering around a 4 quarter trailing PE of 22.8X,” TKS Securities added.

Against the back drop of renewed interest and strong earnings prospects of chief diversifieds TKS is rating John Keells Holdings (JKH), Aitken Spence Plc (SPEN) and Distilleries Company of Sri Lanka (DIST), as BUYS.

“Further hotels and leisure sector being featured as the industry with the highest growth prospects and the sector being re-rated we remain bullish on the sector and recommend Aitken Spence Hotel Holdings (AHUN), Serendib Hotels (SHOT) and Eden Hotel (EDEN) as the best picks of the sector,” it added.

TKS said Banking and Finance sector being the proxy to the economy augurs a strong spurt of growth in the coming years, given the favourable macro outlook of the country.

“Hence we rate Commercial Bank (COMB) and NDB Bank (NDB) as the key buys of the banking and finance sector. Manufacturing and construction sectors would also entice investor attention with the development thrust thereby we recommend Tokyo Cement (TKYO). Further Sri Lanka being featured as the marine hub of South Asia, we expect an impressive increase in marine activities. Hence we recommend Colombo Dockyard (DOCK) as a strong buy, which has a strong hold in small to medium ship building and repairing in the Indian subcontinent,” TKS Securities added.



SLT rings value again; Rises to third slot with market cap topping

Rs. 100 b mark

SRI LANKA Telecom (SLT) has begun to ring value once again with its share price reaching new high propelling its market capitalisation soar beyond Rs. 100 billion mark on Friday. The share price of SLT enjoyed a gain of Rs. 6.70 to close at Rs. 56.10 thereby placing its market capitalisation at Rs. 104.5 billion. It peaked to an intra-week highest of Rs. 58 beating its 2010 highest of Rs. 51. In comparison to end 2010 market capitalisation of Rs. 86.63 billion, SLT’s current value reflects an increase of near Rs. 18 billion or 20%. The previous week it amounted to Rs. 89.1 billion.

With last week’s rise, SLT has moved up to third position behind JKH and Carsons but ahead of Commercial Bank and Dialog Axiata.